The Chemical World This Week
FIRST-QUARTER EARNINGS SURPRISINGLY GOOD The year 1978 was universally written off as a bad one for earnings in the U.S. basic chemical industry, and first-quarter troubles with the weather and the coal strike seemed to add weight to this forecast. But one hint after another surfaced in the past few weeks that the industry may have performed surprisingly well in the first three months. Now, industry earnings reports from most of the largest chemical producers give hard figures: firstquarter after-tax earnings rose about 7% over first-quarter 1977, and sales pulled up about 9%. This means that, in the face of withering market pres sure on prices, the industry's overall profit margin on sales fell slightly from 6.2% to 6.0%. That's the picture from results at 16 of the top 18 basic chemical producers in C&EN's Top 50 lineup (C&EN, June 6,1977, page 50). Inasmuch as these companies account for the great majority of basic chemical industry earnings, final in dustry figures, which C&EN will re port next month, probably won't differ markedly from these prelimi nary averages. From a number of company com ments, the main reasons for this unexpectedly strong earnings show ing are a resilient volume gain despite disruptions, especially in the U.S.; a bit of help from price increases; strong efforts toward productivity
surging Du Pont, and 37% at W. R. Grace (including nonrecurring items). The average earnings gain of 7% for the 16 companies was held down by earnings drops at four important producers. Dow Chemical's hard pull continued as the company's firstquarter earnings dropped 15%. Earnings also fell 3% at Union Car bide, 8% at Monsanto, and 83% at weather- and strike-plagued Olin. Even so, earnings declines at Dow and Monsanto were less than in the pre ceding quarter. As for sales, variations in the first quarter among companies were not nearly so wide as in earnings. Most companies clustered between gains of 7% and 15%. On the weak side, Monsanto's sales rose just 3% and Olin's sales dropped 9%. In profit margins on sales, the going was more difficult than in raw earn Connor: improved fiber performance ings increases. However, nine of the 16 chemical companies managed to gains and cost cutting; and long- pick up profitability in the first missing help for earnings from syn quarter. Stauffer Chemical turned in thetic fibers operations, even outside the best performance. Apparently well past its spate of operating prob the U.S. Among the 16 major producers lems in 1977, Stauffer registered a giving results to date, 11 had first- second straight robust quarter in the quarter earnings gains larger than the first three months of 1978 with an average for the group. Some of these earnings gain of 14% on a sales in increases were handsome indeed— crease of 7%. As a result, Stauffer's 119% at Allied Chemical, 73% at Cel- profit margin rose well over other anese, 41% at Hercules, 39% at a re- companies to 12.2%, up from 11.4% in
Du Pont's sales, earnings, and profitability rose sharply in first quarter Sales, $ billions
Earnings, $ millions
Profit margin, %
2.6
200 Γ ^
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2.4
150
6
2.2
100
2.0
50
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Note: Profit margin is net income as a percentage of net sales.
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0
0
C&EN April 24, 1978
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first-quarter 1977. Stauffer chairman H. Barclay Morley attributes the fine first-quarter showing to substantial sales and earnings gains in three of the company's array of specialtyoriented businesses—agricultural, specialty chemicals, and food ingredients. For the chemical industry as a whole, weather and the coal strike to the contrary, volume held a vigorous pace through the quarter. U.S. production set a new all-time record except in basic, building block chemicals such as petrochemicals, which traditionally lag downstream progress by a few months. U.S. prices managed a small overall gain despite stiff market resistance and widespread discounting. This basic business strength spread into one especially important area, synthetic fibers, a product group that can have a lot of earnings leverage. Although fiber producers are still not happy with profit margins, their earnings made sharp gains over 1977, enough to make a key contribution to the industry total earnings gains. For example, at the largest fiber producer, Du Pont, worldwide fiber earnings shot up to 76 cents a share in first-quarter 1978 from just 14 cents a year earlier. At Celanese, fiber earnings rebounded to 40 cents a share from a loss of 15 cents. And at Allied Chemical, chairman John T. Connor credited fibers profits as one of the two main influences along with oil and gas profits in the company's more-than-doubled earnings so far this year. Allied's fibers made a handsome 18% pretax earnings on sales compared to 10% a year ago. At the other end of the spectrum, some commodity chemicals and the fertilizer product group had a difficult first quarter. Electrolytically produced chlorine is one important basic chemical drawing complaints from more than one producer. For example, Diamond Shamrock president W. H. Bricker says, "In electrochemicals, volume and price softness were experienced in the first quarter, and significant improvement in this area is not anticipated in the near term." Fertilizer was a disappointment for nearly all producers, who saw shipments held up by bad weather before some improvement in March. A leading producer, W. R. Grace, comments that the entire 1978 fertilizer season, which peaks in the spring, will be compressed. Despite these weak areas, the U.S. chemical industry is off to a healthier start in 1978 than generally foreseen. How long the upswing lasts, in view of rampant forecasts of a business slowdown later in the year, remains a question. D
Second-generation fuel < His being developed Second-generation fuel cells, designed to be more efficient and to use a wider range of fuels, are under development at several companies. General Electric has announced a $1.4 million contract from the Department of Energy to support laboratory-scale development work on the cells, which convert hydrocarbon fuels directly to electricity. GE also has a parallel, $400,000 contract from the Electric Power Research Institute to evaluate the economics of various fuel cell power system designs. The General Electric project is one of several parallel programs developing second-generation fuel cells. DOE also is supporting work on these cells at the Institute of Gas Technology and at Argonne and Oak Ridge National Laboratories. The Electric Power Research Institute, with DOE, is supporting research on the cells by United Technologies. Second-generation cells differ from earlier cells in three significant ways, explains Dr. Deb Chatterji, manager of General Electric's electrochemistry branch. They use molten carbonates of lithium and potassium as the electrolyte. Earlier cells used several different types of electrolytes, including phosphoric acid and ion exchange membranes. The new cells use metals
such as nickel for electrodes, rather than the much more expensive and more easily poisoned noble metals, such as platinum, used in first-generation cells. And the newer cells operate at much higher temperatures—about 650° C for the GE cells, compared with less than 200° C for most first-generation cells. Higher temperatures mean that exhaust gases from the fuel cell can be further utilized in power generation. The changes mean, potentially, at least, that the new cells likely will be more efficient than earlier ones. Chatterji estimates overall power plant efficiencies using the carbonate fuel cells of 45 to 50%, 10% higher than those expected from earlier fuel cells. The carbonate cells are expected to be able to run on a wider range of fuels, too, including coal-derived fuels. A carbonate electrolyte requires some carbon monoxide or carbon dioxide in the fuel mixture to operate properly, Chatterji explains, whereas older cells that had noble metal electrodes were poisoned by these gases. The DOE contract will support two years of component R&D for the new fuel cells, investigation of the amount of fuel contamination that can be tolerated, and development of mathematical models. D
Workplace hazards to reproduction assessed "Workers have the right to procreate healthy children," asserts Dr. Eula Bingham, assistant secretary of Labor and director of the Occupational Safety & Health Administration. Her remark helped set the tone for a four-day workshop last week in Bethesda, Md., "on methodology for assessing reproductive hazards in the workplace." The workshop was sponsored by the National Institute for Occupational Safety & Health and by the Society for Occupational & Environmental Health. Experts from various medical disciplines, regulatory agencies, and several academic institutions where the bulk of research on in vitro testing of chemicals is taking place assembled to find a sensible approach to a problem that only recently has reared into public view. "Two years ago the society held a meeting on women and the workplace," said Dr. Peter F. Infante of NIOSH in his opening remarks. Then, the effort was made to get away from the historical emphasis of reproductive hazards being exclusively a problem for women and cancer hazards a problem for men. In the interval, studies that have
focused on cancer hazards for female workers in the asbestos and PVC industries were reported, he notes. Also, the adverse effects of the pesticide DBCP on the reproductive system of male workers came to light. And there are unconfirmed reports that similar problems affect male workers involved in mercury production. Suchfindingsare helping to change the historical emphasis, Infante notes. "The effects on reproduction of chemicals in the environment need to be assessed from the standpoint of both female and male exposure." But if that goal represents a new consensus, none has yet been worked out concerning methodology. For example, there's an apparent split between physicians, who argue that primary care and personal examination are the best means to uncover problems, and others, who would take standard epidemiologic approaches combined with animal model studies. To reconcile some of those differences, workshop participants are reviewing tests and survey questionnaires and are examining case studies of several agents already associated with adverse effects on human reproduction. D April 24, 1978 C&EN
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